Correlation Between Hennessy Focus and Simt Managed

Can any of the company-specific risk be diversified away by investing in both Hennessy Focus and Simt Managed at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Hennessy Focus and Simt Managed into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hennessy Focus Fund and Simt Managed Volatility, you can compare the effects of market volatilities on Hennessy Focus and Simt Managed and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Hennessy Focus with a short position of Simt Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Focus and Simt Managed.

Diversification Opportunities for Hennessy Focus and Simt Managed

-0.05

Correlation Coefficient

Hennessy Focus  Simt Managed

Good diversification

The 3 months correlation between Hennessy and Simt is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Focus Fund and Simt Managed Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simt Managed Volatility and Hennessy Focus is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Hennessy Focus Fund are associated (or correlated) with Simt Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simt Managed Volatility has no effect on the direction of Hennessy Focus i.e., Hennessy Focus and Simt Managed go up and down completely randomly.

Pair Corralation between Hennessy Focus and Simt Managed

Assuming the 90 days horizon Hennessy Focus Fund is expected to under-perform the Simt Managed. In addition to that, Hennessy Focus is 6.02 times more volatile than Simt Managed Volatility. It trades about -0.2 of its total potential returns per unit of risk. Simt Managed Volatility is currently generating about -0.02 per unit of volatility. If you would invest  1,660  in Simt Managed Volatility on September 15, 2024 and sell it today you would lose (5.00) from holding Simt Managed Volatility or give up 0.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Hennessy Focus Fund  vs.  Simt Managed Volatility

Hennessy Focus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hennessy Focus Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Simt Managed Volatility

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Simt Managed Volatility are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Simt Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hennessy Focus and Simt Managed

The main advantage of trading using opposite Hennessy Focus and Simt Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Focus position performs unexpectedly, Simt Managed can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Simt Managed will offset losses from the drop in Simt Managed's long position.

The idea behind Hennessy Focus Fund and Simt Managed Volatility pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.